Macroscope | Asian equities – from tutorial centres to dairy products – are driving earnings growth

Mark Davids and Joanna Kwok say demographic changes, lifestyle upgrades due to the growing middle class and financial deepening across the region make Asian equities the asset class to watch

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Candidates for the national college entrance exam revise at No. 2 Middle School in Hengshui, Hebei province, China, in June 2017. As competition for entry to China’s universities intensifies, the education sector has flourished. Photo: Xinhua

Published: 12:22pm, 20 Apr 2018Updated: 10:33pm, 20 Apr 2018

Asia’s relevance to the world of investors has transformed in less than a generation and value creation in Asia equities has outpaced every other region by leaps and bounds – net profits in listed Asia ex-Japan companies have risen 33 times since 1999.

For investors who haven’t received the wake-up call yet, the inclusion of Chinese stocks into MSCI’s benchmark indices this summer is a harbinger of vast investment opportunities. As China gradually opens up – and China’s liberalisation is a structural force the path of which is clear – its listed markets will come to dwarf the rest of the region.

But three of the most sustainable and compelling drivers of earnings growth in Asia that are creating investment opportunities today aren’t unique to China. They can be found in companies from the Philippines to India.

Made for each other: Indian start-ups and Chinese investors

A man ties a balloon to the horns of a bull statue at the entrance of the Bombay Stock Exchange as part of celebrations of the Sensex index rising to over 30,000 points in Mumbai, India, in April 2017. The deepening of financial services in India, including the rapid adoption of mobile banking, has helped Indian banking stocks accrue value. Photo: Reuters

One major driver of change in Asia involves significant demographic changes, which can be represented in business models that are unfamiliar in the West – for example, China’s booming after-school tutoring industry.

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.css-1m2rp1p{color:#34b8b5;}Macroscope | Asian equities – from tutorial centres to dairy products – are driving earnings growth

Macroscope | Asian equities – from tutorial centres to dairy products – are driving earnings growth